DeGeb - Decarbonizing building heating systems

Developing a regulatory framework for decarbonization in the building heat sector

  • Project Duration: 11/2018 - 10/2021

Research objective

Heating of residential and non-residential buildings is a major source of CO2 emissions in Germany. Buildings and heat systems are a long-living asset with the risk of path dependencies, which makes decarbonization in this sector a challenge. The effectiveness of options, such as energy efficiency and renewable energy, depends on the extent to which they are actually chosen by property owners. That is, it relies on incentives structures and the underlying regulatory framework, including both public and private law. Private law provides incentives to decarbonize (or not) by regulating the relationships between a variety of economic agents, such as landlords and tenants, residents and suppliers of heating appliances or district heating, and communities of joint heating-system owners.

Our research questions are: how do micro-incentives play out for the larger energy transformation of the building sector; what is the role of legal frameworks; how can decisions better be directed towards more sustainable building investment; and what can be learned from this for real-world policies and measures to become more effective?

The project’s objective is to assess and compare the overall economic effects of alternative strategies for shaping the legal framework to decarbonize the building heat sector.

Project outline

The project is divided into five work packages:

WP 1: Modelling the interaction of contracting parties (Lead: University of Kassel)

We start by developing theoretical microeconomic models of individual decisions within a legal framework. We consider legal change both in public law regulations and in contract law and its regulation, drawing on literature on markets with incomplete and asymmetric information as well as boundedly rational actors.

WP 2: Discrete choice and incentivized field experiments on consumer behavior (Lead: University of Kassel)

For calibrating the models, we implement a stated preference discrete choice experiment on hypothetical choices between several heating systems. To deepen the understanding of investment behavior, additional incentivized field experiments focusing on risk, time, and social preferences of the respondents are included. As a result, we obtain willingness-to-pay estimates and behavior-influencing factors.

WP 3: Techno-economic modeling of individual choices in the building heat sector (Lead: Fraunhofer IEE)

Those are fed into a new simulation model of the entire German heating building stock, including decentralized heat systems, heat networks, and actor groups to calculate the aggregate effect of agents’ behavior.

WP 4: Identification and simulation of the effects of integrated policy and technology strategies (Lead: Agora Energiewende)

The outcomes are then compared with the results of an existing sector-integrated, large-scale optimization model of the entire German energy supply, and we reflect critically on the lessons to be learned from bottom-up and top-down modeling for real-world policy making and the promotion of building modernization.

WP S: Stakeholder involvement and project management (Lead: Agora Energiewende)

To ensure a close link to current discussions on reforming energy conservation as well as tenancy law, we will implement an Advisory Board with stakeholders from buildings and energy business, consumer associations and government.

Stay in touch. Subscribe to our newsletter.